Page 70 - Praetura EIS 2019 Information Memorandum

EIS Taxation Reliefs

Capital Gains Tax Exemption Inheritance Tax - Business (Property) Relief
Any capital gains realised on a disposal of Shares in an EIS-Qualifying Company after Through the availability of Business (Property) Relief (BPR), there may be 100%
the Three Year EIS Period, and on which EIS relief (see section a) has been given and inheritance tax exemption on the death of the investor (or on certain lifetime transfers)
not withdrawn, will be capital gains tax free. Any capital gains realised on a disposal for each individual investment that has been held for at least two years. There is no
within the Three Year EIS Period will be subject to CGT at the rate applicable at upper limit on the amount of IHT relief which can be claimed providing the shares are
disposal. held at the date of death and for a minimum period of 2 years.

Loss Relief against income or gains Knowledge Intensive Companies
Loss relief, which is additive to income tax relief, provides tax reliefs on a failed EIS In the 2017 Autumn Budget, the annual limit for EIS investors was doubled from
company of up to 61.5%, including the initial 30% income tax relief (subject to the £1,000,000 to £2,000,000 providing that the additional investment is placed into
relevant caps). A loss on any qualifying investment in the portfolio, irrespective of the Knowledge Intensive Companies. Knowledge Intensive Companies are those that
overall performance of the portfolio, can be offset by individuals against income of spend a certain proportion of their cost base on research and development or
the tax year of the loss, or of the previous tax year, or against capital gains (including innovation. Additionally, they need to meet either an innovation condition or a skilled
against the tax liability that arises on the revival of any deferred gain) of the tax year employee condition.
of the loss and future years. This relief is available at any time in respect of any loss
realised upon a disposal of shares in an EIS-Qualifying Company on which EIS income
tax relief (see section a) or CGT Deferral (see section c) has been given and not
withdrawn. If the circumstances are such that EIS tax reliefs have been withdrawn, it
may still be possible for an investor to claim loss relief, on the amount equal to the
economic loss sustained.

The Finance Act 2013 introduced a cap on reliefs which may be claimed for income tax
purposes. The cap restricts reliefs in any tax year to either £50,000 or 25% of income,
whichever is greater. EIS income tax reliefs are not subject to the cap, nor are losses on
the disposal of shares on which EIS income tax relief has been claimed and retained.
However, losses arising on the disposal of shares where EIS CGT deferral relief only has
been claimed come within the cap on reliefs. The cap applies to losses that arise after
5 April 2013. Losses offset against capital gains are not restricted.